The first exodus began in late summer, 2014, when seven producers from Aon Corp.’s Denver office and one from Chicago left the company in August. The second wave came in September—nine resigned—followed by another, with 10 more people departing in October.

By early 2016, the tally was in: Aon had lost 55 employees to the same competitor in two years.

Was it simply talent drift, or something more targeted? According to a lawsuit filed against JLT Specialty Services (JLT Specialty USA), JLT Re and seven former senior leaders, Aon Corp. and Aon plc allege that they “raided Aon’s clients and employees,” violating their original employment contracts. The global brokerage firm is seeking a permanent injunction and unspecified damages.

The case isn’t the first and likely won’t be the last to emerge from top-tier brokerage talent wars. While it’s still playing out in the Circuit Court of Cook County (Illinois)— and the allegations haven’t been proven— suits like it should prompt brokerage leaders to consider broad questions about retention: What does it really take to keep high-value producers? And what do legal skirmishes say about the ties that bind a brokerage and its star players?

As an industry recruiter, Tom Rivers has seen his share of broker talent zig and zag between major commercial brokerages, seeking the right fit. The managing director at DGA Careers in Vancouver has also witnessed entire teams cross over to a competitor many times. Generally, he explains, they’re eyeing fresh opportunity, like-minded values or in some cases, just a new manager. When it comes to wish lists, he says, money usually isn’t at the top—it’s more likely the third or fourth consideration. “If a team is moving, they want to build something, they want to make a mark. If they can’t find that in their organization, they’ll go en masse.”

Such shifts leave more than a dent in HR rolls. There’s the expertise, contacts and strategy plans, but the real issue can be much broader. “Finding good talent is difficult, and that plays into the importance of keeping it,” says Adam Mitchell, owner of Mitchell & Whale Insurance Brokers in Whitby, Ontario.

For broker principals, retention is always a priority, says Brad Shantz, group CEO at Shaw Sabey in Vancouver. “Does it keep me up at night? No. Do I spend a lot of time thinking about it? Absolutely. Because really, what we have is relationships with our clients and those are through people in our organization. They are the assets of our business.”

Along with JLT, Aon’s filing names seven former senior leaders, zeroing in on non-compete and non-solicitation covenants in their employment contracts. Those contracts set out that each employee’s work has “special value to Aon,” and that “a breach in this agreement will result in irreparable and continuing harm.”

According to the allegations, the company not only lost prized employees, but significant expertise in technology, property, entertainment and hospitality risks. One broker leader specialized in cyber and technology issues, and had landed on Risk & Insurance Power Broker lists in 2011. Another former employee was a global property and marine expert, and a third was a practice leader at Aon’s Financial Services Group. The seven employees named in the suit “were responsible for millions of dollars in annual revenue,” the court documents state, adding that the employees “immediately opened a Denver, Colorado office for JLT.”

JLT did not respond to Canadian Insurance Top Broker’s request for comment, and at present, the case is pending.

“You can’t really prevent the loss of top talent,” says Nancy Shapiro, partner at Koskie Minsky LLP in Toronto. Compensation is one route to retention, but legal means are another common choice. “[Companies] try to handcuff them with the contract that’s going to prevent them from moving their book, or keep them from moving. It’s another way to keep them an unhappy employee, but keep them there.”

Unhappy, yes. Acquiescent? Not always. Legal action centred on employment contract—particularly on restrictive covenants like non-compete or non-solicitation clauses—is steady in Canada, according to Shapiro. “It’s a constant hot button item in litigation, not only in the insurance industry, but in every sector [with] high-value employees with a sales function.”

Brokerage owners here have mixed opinions about restrictive covenants. Some see them as unenforceable, given the 2009 Shafron v. KRG Insurance Brokers decision that put the onus on employers to prove otherwise, but Jean Allard, senior partner at Norton Rose Fulbright in Montreal, cautions against that view. “It’s not true. If they’re not enforceable, they go beyond the law.”

Allard says legal challenges often stem from poorly drafted employment contracts. Companies that cut and paste generic non-compete restrictions into contracts put themselves at risk. He stresses that they must be tailored to the position, the person and the organization. “Too often, HR people use a template that doesn’t address the specific issues of a specific employee.”

He says the way contracts outline a no-fly zone for former employees can also be problematic. The distances set out in non-compete clauses may not be clearly defined—a description of 100 km from a given city is still too vague. “If you draw a line starting from the west end [of the city] or the east end, it won’t end in the same place.”

Then, there’s timing. Employers must be able to justify why they’ve requested a specific no-go time frame. “Does that have to be 24 months?” asks Allard, and then answers, “Probably not,” and he notes that even after six to twelve months, any proprietary information a former employer has “is obsolete.”

When contract disputes wind up in court, “each case will be contextual,” says Nancy Shapiro. For example, if a broker’s tenure was brief, courts generally won’t enforce a covenant.

And she warns that brokerages can’t guarantee enforceability in every circumstance. The industry can shift quickly—if a contract includes a list of outof- bounds competitors in a star broker’s contract, “by the time you’re looking at enforcing the covenant, the firm is no longer around because it’s merged. So, you actually haven’t named the target competitor that you’re [trying] to prevent someone from going to.”

According to the court filing, in early 2015, Aon reminded several former employees of their contract obligations, including the two-year non-solicitation agreement made through stock agreements and leadership performance programs, and asked them to stop soliciting and serving former clients. Three of the employees in question responded in a single letter, stating, “We have not engaged in any improper solicitations or servicing of Aon clients there-under, and have no intention to do so.”

What else binds Canadian firms with their employees— and not just the superstars? From a legal standpoint, while they work for a specific firm, they have an obligation to work in the best interest of that company, according to Shapiro. So, gathering colleagues to plan a mass exodus, “violates the duty of fidelity.”

Workers also owe duty of fair notice of departure. “Reasonable notice can far exceed two weeks,” she notes, citing a Canadian case where employees were held liable for seven months notice of resignation. “[That] is an unusual situation, but it’s not unusual to think that someone owed 30, 60 or 90 days.”

“It’s a useful thing to make sure that terms of employment are laid out clearly and understood by both parties.” In fine-tuning restrictive covenants, employers must find “a delicate balance,” between an employee’s right to make a living and their obligations to their employer, says Allard. “Employment is not slavery.”

Talent wasn’t Aon’s only loss. The court filing lists commercial clients, including a major restaurant chain, among those who followed the Aon brokers to JLT. “Plaintiffs have been substantially damaged as a result of JLT and the Individual Defendants’ conduct through the loss of employees, business, profits, goodwill and thus are compelled to seek the recovery of such damages from the Court,” the filing states.

To keep them, keep them happy

Allard urges retention-minded brokerage principals to start with the basics when they’re hiring: a “well written” contract of employment that speaks to an employee’s level, his or her years of service, experience and knowledge. “That’s the main tool, and unfortunately not well used by a lot of employers.”

That goes beyond new employees—brokerages should review and renew contracts with existing brokers, too, says Shapiro, who urges them to “[have] existing agreements re-signed each time they give them increases to compensation or bonus opportunities or anything that might be able to work as consideration… so that they can get an enforceable contract.”

Outside contracts and compensation, cultural issues cannot be undervalued, according to Tom Rivers. Good leadership goes a long way in establishing strong work culture. “It’s about creating a team and [providing] value for those employees.” He points out that good leaders need to show they value their employees not just for their work products, but for their ideas and feedback, too.

Culture is a key consideration at Shaw Sabey, where Shantz strives to build a fair, inclusive environment, as well as the opportunity (for some) to build equity in the firm. “We work very hard to ensure that the culture supports the business.”

Mitchell seconds that approach. He has pulled his brokerage’s team from various industries and established ambitious goals for them. “We want to set records,” he says, ones that are grounded by an in-house “moral code.” The company can then become a place people won’t want to leave, he reasons. “People don’t quit jobs. They quit managers. No one says, ‘I hate my logo.’”

When dissatisfaction does creep in, it often doesn’t take a lot for another company to look good, warns Rivers. “[Employees] hear a compelling story about another firm, about their client base… and away they go.”

But there’s an alternative ending to that story, Shapiro reminds brokerage leaders: “Keep the brokers happy… they won’t want to leave.”

Legal limits

Legal contracts don’t always guarantee that a star employee will stay put. For example, Shapiro points out that those determined to leave often ask their new employers to make indemnification part of their new contract.

Some brokerages are eager to make that trade, according to Shantz. Say a brokerage has lured away a broker with a good book of business. “The court says you have to pay the revenue they lost in a year, and you pay…you’ve only paid one-times revenue, the market is three-times revenue. [To some,] it’s a great deal.” But not in his view. “If we hire someone from Brokerage A, we say, “You have to honour your obligations to Brokerage A.’”

Still, “there’s no way you can tell the clients who they can or can’t deal with,” points out Rivers. “That client has the right to say, ‘I’m dealing with John Doe.’” If a firm hires away key players, it doesn’t have to be those brokers who reach out to former clients. “They don’t directly solicit the business, and the client can turn around and say, ‘Can I talk to John?’ There are all kinds of ways around a non-compete.”